Experts: New home starts bright spot in depressed housing market


Single-family housing starts in May were at 764,000, an increase of 0.3% from April’s 762,000, according to the latest data from the U.S. Census Bureau.  

Inventory is still lagging, however, as currently, there is less than five months’ supply in the market, which looking at past data would normally be associated with house price growth of around 10% year-over-year, according to a report from Capital Economics.

“Despite monthly volatility, housing starts continues to be a bright spot in an otherwise supply constrained market,” Trulia Chief Economist Ralph McLaughlin said.

Single-family housing completions in May also increased by 2.3% to 717,000, up from April’s 701,000.

On the other hand, Single-family homes authorized by building permits in May were at 726,000, a decrease of 2% from April’s 741,000.

Despite these increases, there does not seem to be enough housing to go around. The housing market increased to its fastest pace on record in May, according to Redfin, a real estate brokerage.

“We have just barely touched the low from the 91-92 recession, which also was the result of a frothy real estate market,” said Brent Nyitray, director of capital markets at iServe Residential Lending, in an email this morning. “If the government wants to get the economy going, it should be asking the question why housing is still so depressed in the face of such tight inventory and high demand.”

And depressed it is. In another report Capital Economics noted that actual home prices lag in total potential; the pace of appreciation is artificially slow for a few reason.

On the bright side, housing continues to be a seller’s market.

The average home went under contract after 42 days, a decrease of one week from last year, and the lowest median days on market since Redfin began tracking them in 2009.

In fact, the low inventory could be keeping home prices from rising higher. A new housing market update report from Capital Economics shows that given the current housing conditions, past experience suggests that house prices should be rising at double their current rate of around 5%.

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(Source: Trulia)

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